Cloud Business Drives Amazon's Profits

While Amazon will probably always be seen as an e-commerce company first, its business has undergone a remarkable transformation in recent years. In the past quarter, services accounted for 43 percent of Amazon's revenue, up from 29 percent three years earlier. Maybe most surprising to many though, is the fact that Amazon's greatest hit is neither Amazon Prime, nor the company's namesake e-commerce platform, but a B2B cloud service named Amazon Web Services.

As our chart illustrates, Amazon’s profit has largely been driven by its cloud business in recent years. Amazon Web Services (AWS), the leader in the highly competitive market for cloud infrastructure, accounted for 50 percent of the company’s operating profit in the past quarter, despite contributing only 13 percent to the company's net sales.

For many years, Amazon has reinvested nearly every dollar it earned in its long-term growth. The size and success of Amazon Web Services has made that impossible though, resulting in Amazon posting record profits in four consecutive quarters now.